The Ministry of Supplies has decided to pave the way for the establishment of a urea factory in Bardaghat, Nawalparasi as Indian Oil Corporation (IOC) has agreed to provide the natural gas needed to produce the fertiliser.

The proposed plant is expected to cost Rs72 billion, and its annual capacity is estimated to be 700,000 tonnes.

Urea is the most commonly used nitrogen fertiliser. The ammonia that is used to make urea is produced by combining hydrogen from natural gas with nitrogen from the air.

Supply Minister Deepak Bohara said IOC had agreed to supply natural gas for the proposed fertiliser plant. “IOC will be laying a pipeline to ship natural gas up to Bhairahawa,” he said. The pipeline will originate in Gorakhpur which lies south of Bhairahawa in India.

Bohara said Nepal would fund the construction of the pipeline from Bhairahawa to the final destination at Bardaghat. The pipeline is estimated to cost Rs15 million per kilometre.

The fertiliser factory will be spread over 400 acres. “We have planned to produce 1,250 tonnes of fertiliser daily,” he said.

Nepal imports 400,000-500,000 tonnes of urea annually. According to Bohara, the government provides a 30 percent subsidy on fertiliser imports which costs it Rs6 billion annually.

“After the urea plant is established, it will reduce the government’s financial burden significantly,” he said. “Similarly, when fertiliser is produced domestically, it will ensure timely and regular supplies.” Almost every year, farmers experience delays in the delivery of crop nutrients which lead to reduced harvests.

Last December, the Investment Board had carried out a feasibility study to establish a fertiliser plant with the help of Infrastructure Development Corporation, India, Institute of Agricultural Technologies and Sah Consult International.

The study showed that natural gas was the most suitable feedstock in terms of technology, energy intensity and end product cost point competitiveness. According to the survey, the plant will need 1.33 million standard cubic metres of natural gas daily to produce 700,000 tonnes of fertiliser annually. The study also recommended building a pipeline to deliver natural gas to the factory.

If the government decides to use electricity instead of natural gas, Dhalkebar is the most suitable location to build the factory, the study report said.

“The ministry decided to build the factory in Bardaghat as using electricity means far higher costs compared to natural gas,” Bohara said. “Also, the new location is suitable considering the alignment of the pipeline which will be built by IOC,” he added.